BRATISLAVA, Slovakia: As the world’s largest per capita car producer, Slovakia stands to be hit hardest if US President Donald Trump makes good on his threat to impose a 20 percent tariff on cars imported from the EU, analysts say.
Trump’s threat was the latest salvo in an escalating trade war that saw the European Union slap duties on US-made jeans and motorcycles in a tit-for-tat response to US tariffs on European steel and aluminum exports.
The specter of US tariffs that sent shares in Fiat Chrysler, Daimler and BMW tumbling on European stock exchanges also spooked Slovakia’s automotive sector.
It boasts Germany’s Volkswagen — which is Slovakia’s biggest private-sector employer — France’s PSA and South Korean Kia along with more than 300 automotive supply companies.
All told, they generate over 300,000 jobs in the eurozone country of 5.4 million. Jaguar Land Rover will also open a new plant in September.
This makes Slovakia the EU’s leading car and car part exporter to the United States in terms of share of GDP — and the most vulnerable to tariffs.
“The ratio of overseas car exports to Slovakia’s GDP is significantly the highest among all countries of the EU, with it being up to 1.7 percent,” the Slovak Institute for Financial Policy (IFP) said in a study.
“An increase in customs duties on car imports would have the biggest impact on Slovakia,” it concluded.
As the only Slovakia-based carmaker that exports directly to the US, Volkswagen — and its many local suppliers — will suffer the most should US tariffs be slapped on the high-end Touareg, Audi Q7 and Porsche Cayenne models produced at its Bratislava plant.
Overall, the carmaking sector has a 44 percent share of Slovakia’s total industrial production and 35 percent of its exports.
Last year, 1,001,520 cars rolled off assembly lines in Slovakia and exports were worth €3.7 billion ($4.3 billion).
Annual production has exceeded one million cars in each of the last three years and is forecast to grow by more than a third by 2020.
A 25 percent tariff on cars could cost Slovakia approximately €90 million, according to IFP calculations.
Tariffs would “definitely pose a challenge for Slovak carmakers reaching out to customers in the United States,” Jan Pribula, Secretary General of the Automotive Industry Association of the Slovak Republic (ZAP), said.
Slovak Economy Minister Peter Ziga has said that Bratislava would rally for unity across the EU in the interests of keeping the car sector tariff-free.
Carmakers based in Slovakia have so far declined to comment on possible US tariffs.
“As these plans are only speculations, we will not comment on them,” Volkswagen Slovakia spokesman Michal Ambrovic said.
The German company’s Slovak operation produced 361,776 cars last year, and 99.7 percent of its production was exported, with 20 percent to the US, according to an internal report made available to AFP.
Groupe PSA Slovakia, maker of Citroën C3 and Peugeot 208 in Trnava, also declined to comment on the tariff impact, but spokesman Peter Svec did say that its plant does not sell to the US market.
PSA produced 335,296 cars in 2017, 91 percent of its production was sold to customers EU countries, according to the company annual report.
KIA Slovakia spokesman Andrej SaHajj also confirmed that sales of its vehicles are restricted to Europe.

The loss of confidence from regional CEOs was the second biggest fall in the world, beaten only by North American bosses, whose optimism fell from 63 percent to 37 percent

Updated 55 min 26 sec ago

Frank Kane

January 22, 2019 03:00

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DAVOS: Chief executives in the Middle East are much less confident on prospects for the global economy than they were in 2018, according to a report from accounting and consulting group PwC.

The firm’s annual survey of top bosses’ attitudes, traditionally launched on the eve of the World Economic Forum Annual Meeting in Davos, showed a big drop in the number of CEOs from the region who believe global economic growth will improve in the next 12 months.

Only 28 percent of Middle East business leaders now see an improvement in economic prospects, compared with 52 percent this time last year. Bob Moritz, global chairman of PwC, said: “The prevailing sentiment this year is one of caution in the face of increasing uncertainty.”

The loss of confidence from regional CEOs was the second biggest fall in the world, beaten only by North American bosses, whose optimism fell from 63 percent to 37 percent.

PwC said that the Middle East decline was due to “increased regional economic uncertainty,” while the North American fall was “likely due to the fading of fiscal stimulus and emerging trade tensions.”

The results of the PwC poll - conducted among 1,300 business leaders around the world - reflected an overall decline in business confidence in each region surveyed. Last year, only 5 percent of CEOs said that global economic growth would decline. For 2019, this has jumped to nearly 30 percent.

Globally, confidence in CEOs’ own companies to grow revenue this year has also fallen sharply. Moritz said: “With the rise in trade tension and protectionism it stands to reason that confidence is waning.”

The US retains its lead as the top market for growth among international investors, but many CEOs are turning to other markets, or investing at home. The ongoing trade conflict between the US and China has resulted in a sharp decline in the number of Chinese bosses chosing the US as a market for growth, down from 59 percent last year to only 17 percent for 2019.

Globally, CEOs are still more worried about the threat of over-regulation of their businesses - named as the top concern again in 2019 - but uncertainty about policy has become a major issue too.

In the Middle East, the main concern is geopolitical uncertainty, followed by the threat of cyberattack, policy uncertainty and the speed of technological change.